Hardee’s franchise turmoil has led to the abrupt closure of 77 restaurants across eight states, exposing deep tensions in the burger chain’s business model amid unpaid fees exceeding $6.5 million.
Lawsuit Ignites Rapid Shutdowns
Hardee’s Restaurants LLC filed suit against franchisee ARC Burger LLC on November 21, 2025, in U.S. District Court, demanding over $6.5 million in unpaid royalties, advertising contributions, technology fees, rent, and training costs. The defaults began in December 2024, triggering a swift enforcement action. ARC Burger, which operated around 80 locations, saw its agreements terminated by Hardee’s in September 2025, though some stores continued briefly. By December 20, 2025, 28 Midwestern sites shuttered first, with closures accelerating through year-end, catching workers and patrons off guard.
Defaults Span Multiple Obligations
The financial shortfalls extended beyond royalties to include advertising funds, tech charges, rent, and training, all critical under franchise terms. Such widespread lapses often prompt franchisors to act decisively, as unpaid obligations strain operations. For a large operator like ARC Burger, spanning multiple states, the cumulative debt eroded viability, limiting recovery options as suppliers, staff, and lenders reacted.
Inherited Challenges from Prior Owner
ARC Burger acquired its portfolio in 2023 from Summit Restaurant Holdings, which had filed for Chapter 11 bankruptcy after closing 39 locations. Backed by High Bluff Capital Partners and led by an executive with decades in retail and restaurants, ARC positioned itself as a stabilizer. Yet the inherited assets carried underlying issues, including tight margins amid rising franchise mandates. Hardee’s noted “solid sales” at affected Missouri stores, yet defaults persisted despite months of resolution efforts, pointing to pressures from fees, labor, food costs, and debt outweighing revenue.
Widespread Impact Across States
Closures hit Alabama, Florida, Georgia, Illinois, Kansas, Missouri, Montana, South Carolina, and Wyoming. Specific sites included Billings, Montana’s 2404 Central Ave. and 608 N. 27th St., plus Goose Creek and Moncks Corner in South Carolina’s Berkeley County. Signs reading “until further notice” appeared at some, blending customer thanks with vague timelines. Reports varied slightly on the exact tally—77 or nearly all—but confirmed the scale. Local confusion mounted as drive-thrus went dark, with litigation steering outcomes more than on-site managers.
Ongoing Legal Battles Signal Deeper Strains
This episode mirrors broader instability at Hardee’s. Paradigm Investment Group, running 76 locations, sued on April 14, 2025, seeking $35 million in damages, fees, and an injunction against termination. It contested a $150-$160 monthly technology fee since 2021, mandatory app loyalty programs, third-party delivery, and 10 p.m. closing rules. Paradigm cited low post-2 p.m. sales, like $19 per half-hour versus $239 at breakfast in one Alabama store, arguing unprofitability under the mandates. A jury trial is set for March 30, 2027, in Tennessee’s Middle District, with Hardee’s pausing terminations during proceedings.
System-wide declines amplify these disputes. Hardee’s U.S. sales dropped 5.3% to $1.831 billion in 2024 across 1,574 locations, from $1.932 billion at 1,610 sites in 2023, yielding about $1.146 million per unit. Over a decade, roughly 200 stores closed, with 150 in the last three years and domestic sales down 12% since 2014. Banks like BMO Harris reportedly shunned funding in 2021 due to risks. As franchisees push back on fees and operations, Hardee’s faces questions on sustainability, with outcomes from ongoing suits likely shaping the chain’s future footprint and operator relations.
Sources
Hardee’s Restaurants LLC v. ARC Burger LLC court filing. U.S. District Court, November 21, 2025
Paradigm Investment Group v. Hardee’s Restaurants LLC court filing. U.S. District Court for the Middle District of Tennessee, April 14, 2025
FTC Staff Guidance on franchisor fees and disclosures. Federal Trade Commission, July 2024
Technomic Top 500 Chain Restaurant Report data on Hardee’s sales and unit counts. Technomic, 2024